Correlation Between OEM International and Bufab Holding
Can any of the company-specific risk be diversified away by investing in both OEM International and Bufab Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining OEM International and Bufab Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OEM International AB and Bufab Holding AB, you can compare the effects of market volatilities on OEM International and Bufab Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in OEM International with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of OEM International and Bufab Holding.
Diversification Opportunities for OEM International and Bufab Holding
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between OEM and Bufab is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding OEM International AB and Bufab Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bufab Holding AB and OEM International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on OEM International AB are associated (or correlated) with Bufab Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bufab Holding AB has no effect on the direction of OEM International i.e., OEM International and Bufab Holding go up and down completely randomly.
Pair Corralation between OEM International and Bufab Holding
Assuming the 90 days trading horizon OEM International AB is expected to under-perform the Bufab Holding. In addition to that, OEM International is 1.22 times more volatile than Bufab Holding AB. It trades about -0.04 of its total potential returns per unit of risk. Bufab Holding AB is currently generating about 0.21 per unit of volatility. If you would invest 39,000 in Bufab Holding AB on August 28, 2024 and sell it today you would earn a total of 2,700 from holding Bufab Holding AB or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
OEM International AB vs. Bufab Holding AB
Performance |
| Timeline |
| OEM International |
| Bufab Holding AB |
OEM International and Bufab Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OEM International and Bufab Holding
The main advantage of trading using opposite OEM International and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OEM International position performs unexpectedly, Bufab Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bufab Holding will offset losses from the drop in Bufab Holding's long position.| OEM International vs. Bufab Holding AB | OEM International vs. Lagercrantz Group AB | OEM International vs. Troax Group AB | OEM International vs. Nolato AB |
| Bufab Holding vs. Addtech AB | Bufab Holding vs. Teqnion AB | Bufab Holding vs. Vitec Software Group | Bufab Holding vs. Lagercrantz Group AB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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